Bank reconciliation example with solution
The example
It's October 31. Maple Street Coffee's bank statement shows an ending balance of $9,155.00. QuickBooks shows $8,780.00 for the same checking account. While comparing them line by line, you find:
- Check 1107 for $420.00 and check 1109 for $185.00 are in the books but haven't been cashed yet.
- A $310.00 deposit made late on October 31 is in the books but isn't on the statement yet.
- The bank charged a $15.00 monthly service fee that isn't in the books.
- The bank paid $5.00 interest that isn't in the books.
- A customer's $540.00 check was entered in the books as $450.00.
Try it yourself first: what should the reconciled balance be?
The solution
| Bank side | Amount |
|---|---|
| Ending balance on the statement | $9,155.00 |
| Add: deposit in transit | + $310.00 |
| Less: outstanding checks (1107 $420.00 + 1109 $185.00) | − $605.00 |
| Adjusted bank balance | $8,860.00 |
| Book side | Amount |
|---|---|
| Balance in QuickBooks | $8,780.00 |
| Add: deposit error ($540.00 entered as $450.00) | + $90.00 |
| Add: interest earned | + $5.00 |
| Less: bank service fee | − $15.00 |
| Adjusted book balance | $8,860.00 |
Both sides show $8,860.00, so the account is reconciled. Only the book-side items need entries in your books: correct the deposit to $540.00, and record the fee and the interest. The bank-side items need nothing; they'll clear on next month's statement.
The $90.00 error was a transposition error: 540 typed as 450. A difference that divides evenly by 9 often means two digits were swapped.
The same reconciliation in QuickBooks Online
- First fix the book side: correct the deposit to $540.00, and add the $15.00 fee and the $5.00 interest (they usually arrive through the bank feed).
- Open Reconcile, choose the checking account, and enter the statement's ending balance, $9,155.00, and ending date, October 31.
- Tick every transaction that appears on the statement. Leave checks 1107 and 1109 and the $310.00 deposit unticked.
- The Difference should now be $0.00. Select Finish now.
QuickBooks does the bank-side arithmetic for you: the items you leave unticked are the outstanding checks and deposits in transit.
Common questions
What is a deposit in transit?
Money you've deposited and recorded in your books that the bank hasn't added to the statement yet, usually because it was deposited on the last day of the month.
What is an outstanding check?
A check you've written and recorded that the person hasn't cashed yet, so it isn't on the bank statement.
Which items need journal entries?
Only items on the book side: bank fees, interest, and errors in your own records. Deposits in transit and outstanding checks already are in your books.
What if the difference won't reach zero?
Look for a missing or duplicate transaction, a wrong amount (check whether the difference divides by 9), or a wrong ending balance or date on the reconciliation screen.
Related guides
Sources
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